Act now on mis-sold endowments: new article

walmergreen

Hi
I have an endowment (pre 1988) and after converting to Repayment etc I eventually complained that I had been mis-sold. My reasons for doing so were that a number of years prior to things going wrong and prior to the 10th anniversary of the Plan, I wrote on two occasions asking the Company about the poor performance of the product, and also mentioned the large annual percentages that the salesman had talked about 'in the margins' whilst actually writing down 12%, 8% & 6%. In the first case I was told that after the 10th anniversary that much more of the monthly payment would be invested and that management charges reduced thereby allowing more to invest more. The response to the 2nd letter was a 9 pager re-assuring me that things can go up.....as well as down etc, and basically not to worry, and we will be back to you before and if this happens anyway.

I eventually asked Endowment Helpline to handle the paperwork for me and whilst they have been very good, they eventually came back and said that they were collecting a group of people with complaints dating from pre 1988 and would seek legal advice. However, I notice that their website has disappeared and I'm not too sure of their current status. My question is this:

In a world where the government is presently supporting a failing bank, and have also talked about retrospective legislation regarding some pension problems.

For those of us with pre 1988 endowments, is this the end of the line??

Regards
Alex

dunstonh

For those of us with pre 1988 endowments, is this the end of the line??

Yes. It would not be fair on the advisers in question if you were to apply rules retrospectively to them.

mayb_2

dunstonh it is not particularly fair on the victims if you don't! Those who lost out don't have the option to ignore it why should the person who sold it - whenever that was? I am aware that the regulation wasn't there but it was precisely because of these problems that regulations were put in place. So those whose problems lead to the need for regulation cannot be covered by it? I think that should at least be questioned somewhere on high regardless of the effect on advisors - why should they be the main concern?

dunstonh

dunstonh it is not particularly fair on the victims if you don't!

Why?

Shall we now go back and prosecute all smokers who have smoked in a pub or public area at some point in their life? Shall we prosecute all those that drove at 50mph down a road before the road was changed to 30mph?

Those who lost out don't have the option to ignore it why should the person who sold it

Because it was sold within the rules (erm, there were basically no rules) at that time. You cannot say that because we do things differently now that we should have done back then. You have to draw the line somewhere.

I think that should at least be questioned somewhere on high regardless of the effect on advisors - why should they be the main concern?

Starting to apply laws and rules retrospectively is highly dangerous. Its not about protecting one side or the other but using common sense.

mayb_2

Common sense tells me that there is a big difference between the annalogies you have used and common sense - more a matter of convenience. The effect on the purchaser is ongoing in the same way as if they had been robbed the affect is ongoing. You cannot say that missales were not committed both before and after the regulations were brought in - this is not law it is a regulation. However, the courts do not allow a punitive payment in these cases so we are not talking about punishment but redress. This is due to all those who were not advised of the risks of their purchase. If you like you can look at it in terms of consumer law - it should do what was claimed for it or it was not fit for purpose when purchased - therefore you are due redress.

Retired_I.F.A.

Anyone with common sense buying a low cost endowment which ever way you think of it is just a piece of paper would have read it and seen the g-teed amount payable on it.

PRE 1986 it was assumed people had common sense. Post 1986 it was assumed everyone was an idiot.

walmergreen

Dunstonh Thanks for your replies. I take your point regarding the unfairness on the individual. However, in my own profession, this is dealt with by the professional body without the recourse to legislation. It is perhaps unfortunate that there were so many 'salesmen' working within that industry, and with very little regulation in place. Surely that was because the Insurance Companies who were the major employers and designers of the products, wanted it that way?

With regard to redress.........surely it just cannot be fair to say that one person on one side of the line should have redress, and someone on the other side of the line receives nothing. Even with a sliding introduction to redress there is a point where one benefits and another does not. ie the 'stroke of midnight'. The purpose is that the individual is placed back into a position where they would reasonably expect to be, and not to pay off their endowment mortgage for them.

I do not blame the person who sold me this product, indeed I have found him to be truthful and professional for the 20+ years that I have known him. The comments made to me at the point of purchase I suspect would have been pretty much 'industry standard' ie there was a tendency to use the highest percentage of growth to emphasise the attractiveness of the plan to the buyer. I would say that as we all know that 'things go up as well as down' that the product designed by the industry was not sound.

In that case, why not compensate all people who had purchased endownments or indeed compensate no one! When redress was introduced for some but not others, especially when an endownment has a limited life, and especially as the product and the marketing to the public, were dubious.........I do tend to think that this was done with heavy influence from the major players in the industry. I also remember the quite high management charges paid on the plan prior to the 10th anniversary. ie Even though I was sounding alarm bells, and querying the product, the Company was still content to take those charges even though I suspect that they already knew that the product was not sound.

In conclusion, my question was really of a technical nature and what I am asking is this: Is there any redress or likely to be any change for those with endowment mortgages purchased prior to the 1988 deadline? ie Is there any comment regarding this issue within the industry, or is there a group somewhere fighting a 'lost cause'. As no one is likely to be taking on a large multi international company in Court, I just wonder if this issue is now finalised?

Mayb Thanks for your comments

dunstonh

I take your point regarding the unfairness on the individual. However, in my own profession, this is dealt with by the professional body without the recourse to legislation. It is perhaps unfortunate that there were so many 'salesmen' working within that industry, and with very little regulation in place. Surely that was because the Insurance Companies who were the major employers and designers of the products, wanted it that way?

You are talking about an industry that was dominated by large salesforces and was perceived as a sales role back then. It wasnt a profession.

surely it just cannot be fair to say that one person on one side of the line should have redress, and someone on the other side of the line receives nothing.

Just because you have an endowment, doesnt mean its a mis-sale. If the endowment was sold within the rules that were in place at the time then it is not a mis-sale. 1988 introduced regulation and a range of rules which have tightened and improved over the years since. For example a complaint about a policy started in 1998 would take things into account that a 1989 policy wouldnt.

So, in your case, the rules pre 1988 were virtually none.

there was a tendency to use the highest percentage of growth to emphasise the attractiveness of the plan to the buyer

Growth rates used back then were much higher but reflected growth that "had" been achieved in the years previous. Indeed, many argued back then that the growth rates used were too low as generally they understated what had been happening (largely due to higher inflation).

I would say that as we all know that 'things go up as well as down' that the product designed by the industry was not sound.

It was sound for the era. The concept is still good as well. The problem was the changes to the economy and increased solvency requirements and the biggest stockmarket decline for a generation made it harder for many endowments to achieve target. Ironically, had those things not happened, you would now be financially worse off even though the endowment would be coming in with a surplus.

In that case, why not compensate all people who had purchased endownments or indeed compensate no one!

You are working on the assumption that they were all mis-sales. That is not the case.

Also, who pays the redress in all those cases? You would be forcing people who have correctly sold the products to pay redress when they have done nothing wrong.

I also remember the quite high management charges paid on the plan prior to the 10th anniversary. ie Even though I was sounding alarm bells, and querying the product, the Company was still content to take those charges even though I suspect that they already knew that the product was not sound.

Those charges were high by todays standards but not by the standards in place back then. You must remember that the UK was largely a boom/bust economy with periods of high inflation. The pricing of products was based on that. Currently, the pricing of products is based on a low inflation more steady economy.

Is there any redress or likely to be any change for those with endowment mortgages purchased prior to the 1988 deadline?

No. It wont happen and realistically it cannot. Also, it only impacts on a minority as its only the solicitors, accountants and what are now IFAs and those groups account for an even smaller percentage of mis-sales to begin with.

s there any comment regarding this issue within the industry, or is there a group somewhere fighting a 'lost cause'.

None at all.

As no one is likely to be taking on a large multi international company in Court

It isnt a case of a large multi-international though. The salesforces voluntarily agreed to consider pre 88 complaints (bet they wish they hadnt now! - although to be fair its only a small window of pre 88 endowments that are failing to hit target). Its only solicitors, accountants and what are now IFAs that didnt. All three of these professions are largely made up of small local firms.

Unless you can show evidence that laws were broken in the sale of the product, you dont have a chance.

I know its not what you want to hear and for reference, I wasnt trading pre 88 as an IFA so I have no personal liability if pre 88 cases were included. However, what you are asking for is retrospective changes in rules/law. It doesnt matter what profession you are in. If retrospecitve changes were allowed, it would be unfair.

mayb_2

dunstonh there are many contradictions within what you have written above and if you read it through you may see them for yourself.

Anyone with common sense buying a low cost endowment which ever way you think of it is just a piece of paper would have read it and seen the g-teed amount payable on it.

PRE 1986 it was assumed people had common sense. Post 1986 it was assumed everyone was an idiot

I think many of us who have suffered from our purchases from what even dunstonh has agreed were salesmen would be offended by that statement RetiredIFA - the problem was in the main that the verbally guaranteed amount was not mentioned at all on the paperwork and I personally, and again I perceive many others, did not receive such paperwork on our savings plan (endowment we found out later). You have heard mentions of scribbles in margins and on bits of paper.


If the amount was guaranteed on a document then there is not a problem as that amount has to be paid.

We are not talking of punishing anyone here (though that is another argument in itself) but of redress - as you so often remind people yourself dunstonh - this is not compensation. It puts people back in the position they would have been in with a repayment mortgage. I would also argue that if this had not been addressed in this way by a government backed scheme, there could well have been a far greater backlash on the economy and also the financial institutions the government seeks to protect at the expense of the consumer.

You are talking of sales forces dunstonh and I would remind you of the pickle we are now in because of sales force mentality being applied to the sub prime mortgage market - as walmergreen mentioned - look at Northern Rock. You and I argued on another thread about the subprime market dunstonh and you defended the sale of mortgages at 5 and 7 times income - again blaming the consumer for the problem not the financial institutions.

I think history has proved me right on that one and I am just an observer of these things.

dunstonh

We are not talking of punishing anyone here (though that is another argument in itself) but of redress

You are talking about punishing though. Who pays the money? Those with high ratios could be sacked and certainly wouldn't be employable elsewhere. You are also assuming that just by having an endowment means that its a mis-sale and that is wrong.

Maybe I should put it another way. Lets say work you did over 20 years ago in your profession was done legally and within the rules at that time. Then 20 years on, rules change and you are told that what you did at the time was right but its not longer the case. Therefore you need to pay out £2500 on each one you did. Lets say you did that 300 times. You now need to pay £750,000 and if you cannot we will take everything you own.

Or, as i used before, a smoker now has to pay a fine for every cigarette they smoked in a pub before the law changed. Even though it was legal at the time.

You are talking of sales forces dunstonh and I would remind you of the pickle we are now in because of sales force mentality being applied to the sub prime mortgage market

And a lot of that area is regulated and where wrong doing is found, it can be dealt with.

You and I argued on another thread about the subprime market dunstonh and you defended the sale of mortgages at 5 and 7 times income - again blaming the consumer for the problem not the financial institutions.

It takes two to tango. You cannot keep blaming one side as being the only guilty party. You seem to think that if someone gets turned down by a bank that they will accept that decision and forget about buying. They dont. They keep looking and keep trying until they find someone that does lend them the money.

Someone else mentioned in another thread that the brokers that turn someone down are considered the bad guys and the broker that gets the mortgage even if it involves twisting the information is seen as the good guy by the consumer. In reality it is the opposite but you have too much faith in the consumer to accept a no decision.